| Generally, when we think of insurance, we think of it as a means of protecting us from the risk of losing an asset or the risk of loss due to the damage of an asset. Car insurance, homeowners insurance etc. fall within that category, which is not tremendously relevant to financial planning. Some forms of investment are insured or can be insured, but most can not be insured. But, an investor may need to consider life insurance under certain circumstances. Keeping in mind that the concept of insurance is to protect one from the risk of loss, it should not be a sustitute for investing in investments that have earnings and the potential for capital gain. In other words, whole life insurance policies and annuities are not good investments. However, a young wage-earner with a young family and a spouse who would not be able to providede the same level of income as the family's wage-earner should consider some form of term life insurance coupled with a strong investment program. And similarly, a business owner or farm owner with a family should consider the need to protect the family from the loss of the business owner or farm owner. Very large estates may also need to examine the potential tax advantages of life insurance under certain circumstances. |
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